2024 (12) TMI 699 - AT - Income Tax

Rectification application dismissed by CIT(A) since it requires verification of books of accounts of the assessee - adjustment in respect of the GST/CENVAT refund challenged - HELD THAT - The impugned action of the Ld.CIT(A) can be said to be akin to missing the woods for trees . If the argument of the Ld.CIT(A) not to interfere with the CPC is accepted (i.e. issue raised by the assessee needs verification) then the Ld.AR wondered as to how CPC in the first place made such an adjustment and merely because assessee didn t file appeal against the intimation order u/s.143(1) of the Act and proceeded under alternate procedure u/s.154 of the Act the assessee should not be denied its claim on hyper technical ground. It must be borne in mind that in the case of Owners Parties interested in MV Vali Perov. Fernandeo Lopez 1989 (9) TMI 383 - SUPREME COURT it was observed by Hon ble Apex Court that Rules of procedure are not by themselves an end but means to achieve the ends of justice. Rules of procedure are tools forged to achieve justice and are not hurdles to obstruct the pathway to justice. Construction of a rule of procedure which promotes justice and prevents its miscarriage by enabling the Court to do justice in myriad situations all of which cannot be envisaged acting within the limits of permissible construction must be preferred to that which is rigid and negatives the cause of justice. Procedure is meant to subserve and not rule the cause of justice. Thus we don t accept the impugned action of the Ld.CIT(A) and therefore we set aside the same and restore the appeal back to his file with a direction to decide the grounds of appeal raised by the assessee on merits as contemplated under sub-section (6) of sec.250. Assessee appeal allowed for statistical purposes.

Summary

Issues Involved:

1. Dismissal of appeal by CIT(A) under Section 246A against the rectification order under Section 154.
2. Alleged failure to provide sufficient opportunity during rectification proceedings under Section 154.
3. Addition under Section 143(1) and rectification under Section 154 being mechanical without reasoning.
4. GST refund addition not being a mistake apparent on record.
5. Adjustment of GST Input tax credit refund without considering submissions.

Issue-wise Detailed Analysis:

1. Dismissal of Appeal by CIT(A) under Section 246A:

The primary issue revolves around the dismissal of the appeal by the CIT(A) against the rectification order passed under Section 154 of the Income Tax Act. The appellant argued that the CIT(A) erred in dismissing the appeal, as the rectification order was challenged on grounds of jurisdiction and procedural fairness. The Tribunal noted that the CIT(A) dismissed the appeal on the basis that the issue required verification of books of accounts, which could not be addressed under Section 154, meant for rectifying apparent mistakes. The Tribunal found this reasoning overly technical and emphasized that procedural rules should facilitate justice rather than obstruct it. Consequently, the Tribunal set aside the CIT(A)'s dismissal and directed a reconsideration on merits.

2. Failure to Provide Sufficient Opportunity:

The appellant contended that the rectification proceedings under Section 154 were conducted without granting a sufficient opportunity to present their case. The Tribunal acknowledged this grievance, noting that the procedural fairness was compromised as the appellant's objections were not adequately addressed by the CPC during the rectification process. The Tribunal highlighted the importance of providing a fair chance to present one's case, especially when significant tax adjustments are involved.

3. Mechanical Addition under Section 143(1) and Rectification under Section 154:

The appellant challenged the mechanical nature of the addition under Section 143(1) and subsequent rectification under Section 154, arguing that these actions lacked proper reasoning and application of mind. The Tribunal agreed with the appellant, noting that the CPC's actions appeared to be automated and devoid of a detailed examination of the appellant's submissions. The Tribunal criticized the CIT(A) for upholding such mechanical actions without delving into the substantive merits of the case.

4. GST Refund Addition Not a Mistake Apparent on Record:

A significant point of contention was the addition of the GST refund as taxable income, which the appellant claimed was not a mistake apparent on record and hence outside the purview of Section 154 rectification. The Tribunal observed that the GST refund was initially accounted as an asset and not as an expense, thus not constituting taxable income. The Tribunal found merit in the appellant's argument that the GST refund should not have been treated as income, as it was a realization of an asset rather than a revenue item. The Tribunal directed the CIT(A) to reconsider this aspect with a proper verification of records.

5. Adjustment of GST Input Tax Credit Refund:

The appellant argued that the adjustment of the GST Input tax credit refund was made without considering their submissions. The Tribunal noted that the CIT(A) failed to adjudicate on this adjustment, which was a critical oversight. The Tribunal emphasized that the appellant's submissions regarding the accounting treatment of GST refunds needed thorough examination, and any adjustments should be based on a clear understanding of the appellant's financial records and tax audit reports.

Conclusion:

The Tribunal concluded that the CIT(A) erred in dismissing the appeal without a substantive examination of the issues raised by the appellant. The Tribunal set aside the CIT(A)'s order and remanded the matter for a fresh adjudication on merits, directing the CIT(A) to consider the appellant's submissions comprehensively and, if necessary, seek assistance from field units for verification. The appeal was allowed for statistical purposes, emphasizing the need for a fair and just resolution of the appellant's grievances.